Reader’s Guide: ‘Crude Democracy: Natural Resource Wealth and Political Regimes‘ by Thad Dunning (Cambridge University Press, 2009)
I apologize for recommending this book to you since it isn’t really on our topic of the impact of oil on American foreign policy (this is, of course, what comes of recommending books that you haven’t read). Nonetheless, since it is an important book I thought I would prepare a fairly short summary of the major points and allow those of you who want to dig deeper to do so on your own.
The central argument of the book is that resource revenues (including but not limited to oil) can support as well as undermine democracy. This, of course, runs directly contrary to the current accepted wisdom of the resource curse, that countries with substantial resources can generate sufficient rents to function as states, often including substantial payoffs to well-connected individuals, without having to get their populations to agree to pay taxes to support them; such efforts would presumably have involved some sort of accountability to the population, leading to democracy.
The central metaphor of the book is a game-theoretic model of elites and masses in a democracy, where elites have to decide whether the benefits of a successful coup are more than the costs and risks involved; the question is how those payoffs change if the state generates significant resource rents. He argues that such rents, on the one hand, generate direct pressures supporting the coup (increased wealth of the state makes it a more attractive target, and masses cannot plausibly commit themselves not to increase future taxes on the elites), and on the other hand generate indirect pressures against coups (the rents make it easier for the government to give benefits for the masses without raising taxes on elites and less likely that masses will feel impelled to tax the elites in the future). He contends, not that this balance always tips one way or the other, but that it varies systematically, depending on certain conditional factors. In particular he theorizes that the democratic effects will be stronger in states which are less economically dependent on the resource (reducing the value of capturing the state and allowing the elites to derive income from other sources) and those which have high inequality (sic) in the non-resource economy (since resource rents can reduce the costs of redistribution for the elites). He then suggests that these conditions are more likely to be found in certain Latin American countries than those of Africa, for example.
The remainder of the book is devoted to testing these notions. Chapter two expands the theoretical argument. Chapter three develops two game-theoretic models from the theory. The first centers on when elites in a democratic state with resource rents will find the risks of staging a coup attractive while the second considers how elites in an authoritarian state with resource rents are likely to respond to the threat of revolutionary change. Chapter four uses cross-national time-series statistics to test the theories. Dunning finds that inequality does indeed predict democracy both globally and within Latin America (“the most unequal region in the world”). He also shows that different operationalizations of the key concepts and adding various control variables do not have much impact on the relationship.
Chapters five and six are devoted to studies of cases where the theory predicts the democratic effects will be strong: Venezuela, Chile, Bolivia, Ecuador, and Botswana. Here Dunning looks, not at the outcome (which he already knows), but for the mechanisms which have been predicted in the theory. For example, the theory predicts that domestic conflict over redistribution should increase as rents decline and decrease as rents increase.
Dunning argues that in Venezuela the rents from oil reduced the incentives for the elites to oppose democracy, not because they gained directly from the oil, but because those rents nearly eliminated any pressure for redistribution of wealth from the elites; the drop in oil prices in the 1980s, however, put the democratic government under increasing pressure. He also argues that the increase in oil prices explains why there has been so little opposition to Chavez’ regime, which he contends has not in fact done much in the way of actual redistribution since the social programs have been funded by oil.
In the case of Chile, Dunning argues that the decline in prices for nitrates in the late 1920s explains the upsurge of internal conflict there. The 1973 coup is a challenge to the theory since copper prices were fairly high; he makes an interesting counterfactual argument that without resource rents the conflict would actually have been more intense. In Bolivia the effects are not felt until the form of ownership changes: because the tin mines were originally owned by a small elite, the revenues did not flow as rent to the state but instead to these individuals. Thus the elites were fiercely opposed to any redistribution of wealth. He argues that after Bolivia nationalized the mines in 1952, rents from tin and later oil helped stabilize democracy there. However, the regional nature of Bolivia has increasingly made oil resources a basis for internal conflict.
In Ecuador Dunning argues that the 1972 coup, which occurred just as oil production was increasing rapidly, was carried out in order to avoid redistribution; however, he contends that Ecuador redemocratized later in the decade, using oil rents for social programs. He also notes the problems of basing democracy on oil, citing the price drops in 1986 with subsequent cutbacks in social programs and considerable unrest until prices rose again a few years later. Botswana is an African case where the resource is diamonds. Dunning notes that the interest in cattle ranching, the main alternative industry, is highly concentrated in the hands of elite members and that they have used income from the diamond mines to support social programs.
Dunning concludes this analysis by arguing that there are crude democracies just as there are crude autocracies, that the differences between them are systematic rather than random, and that therefore we should be able to make reasonable predictions about the kind of political systems most likely to emerge in particular areas. He also discusses a number of cases which present challenges to his theory, including the Soviet Union and Indonesia, and perhaps Iraq. This is, I think, one of the most important challenges to the easy generalizations of the “resource curse” literature that I have yet seen.
Prepared by Roy Licklider for Geopolitics of Petroleum Faculty Cluster, Rutgers University, spring 2009
From The Geopolitics of Petroleum ACAS Blog Series